Aston Martin Lagonda (lon:aml)
Aston martin – More Positive New For The New Shareholders


ItemCurrent PeriodPrevious Period
Period6 Months6 Months
Adjusted Earnings
Adjusted EBITDA(£89m)£21m
Statutory Profit(£200m)(£63m)
Adjusted Profit(£213m)(£71m)
Total Debt£751m£843m
Net Debt
Title: Aston martin – More Positive New For The New Shareholders
Company: AML - Aston Martin Lagonda
Share Price Then: 58p
Author: Ian Smith
Date: Wed 28 Oct 2020
Comments: Aston Martin have just announced another share issue,

£125 million representing 13.7% of the current share issue at 50p, roughly 33% have been allocated to the current major shareholders the remaining to institutions, in other words no chance for any remaining private investors.

Expanded and enhanced technology agreement signed with Mercedes-Benz AG, access to advanced technologies to be provided in exchange for new shares, Mercedes-Benz AG's equity stake to be increased in several stages up to a maximum of no more than 20.0%

So another 33% increase in issued shares, for anyone who has been holding on to an investment made before the start of the year this means little as 1/3 of almost nothing is still almost nothing, but to more recent purchasers this is a negative bit of news in the short term.

Although this is theoretically subject to a shareholder vote, I am assuming that this is just a formality.

However this news means that I have shifted my view to that Aston Martin is share with risks that may be worth purchasing, provided that you understand the core risk; As I see it the company has close to £1bn of debt and if the DBX doesn’t sell in quantity then it’s all over, there is no point in raising more capital because there are no radically different new models in the pipeline.

Once Mercedes gets to a 20% holding not only might their involvement make casual issuing of new shares difficult, it provides access to an electric drive train something Aston doesn’t have and can’t afford to develop.

Targeting c.10k vehicles, c.£2bn revenue and c.£500m Adjusted EBITDA by FY 2024/25

If the above actually occurs were to be the case, and what the expletive does Adjusted EBITDA actually mean, then you could easily make the case for market cap being 4-6 times £500m or £2bn-6bn. Given the current market cap of £1bn at 55p and adding in the new 33% share issues this would be 84p-250p

Given the debt level it seems pretty likely to me that no dividends will be paid for the next few years however they are a FTSE 250 company so some institutional support will remain. Tracker fund has no choice and discretionary funds may still find the risk acceptable.

For me the big downsides are that it is possible to almost see the company as a private company, Mercs share holding plus Yew Tree and its associated have a controlling interest.

There is also no reason to be sure about the sales level, the DBX is the company’s saviour and there doesn’t seem to be much information available publically about sales.
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Previous Commentaries On Aston Martin Lagonda
Date Share Price Author Commentary
Wed 29 Jul 202052.75pIan Smith

Aston Martin – Half Year Results

Anybody who has been following Aston Martin is bound to be expecting a disastrous set of numbers for the 2020 H1, pretty much most of which is outside of the management’s control.

Total number vehicles sold down from 5,438 t0 2665 and revenue down to £146m, from £406m and net debt is horrible at £751m, although £110m are lease liabilities, the cost of financing this debt was£68m.

The company has around £360m in cash, but £1,000m in debt if you exclude the lease liabilities

Remember that they have just been back for £668m from shareholders pretty much wiping out the old owners, the total share count at 30 June 2020 was 1,824m, increased by 1,596m

For some reason the share price has risen a bit on this news, maybe it is not quite as bad as some had expected, but for me it

Yet again the update stresses the benefit of the F1 team, the costs of this are unclear, are the bigger sponsors going to be dropped so the car is mostly Aston Martin.

It also seems a bit odd to be expecting returns from a racing program so quickly especially where the team is one of the best of the also rans rather than a winner.

As of today there is some controversy over the design of their car, have the followed the rules requiring them is design certain parts themselves?

So much is dependent now on the DBX not just doing well but doing exceptionally well, I just can’t see how another big share issue is avoidable unless the DBX sells just reasonably well and the company is taken over by its creditors.
Wed 01 Jul 202050pIan Smith

Aston Martin – Back For More Money

At the end of June Aston did another share issue, this time for £150 million issuing the equivalent of 19.99% of the existing shares at 50p each, at this price they were pretty close to the open market price.
This was done pretty rapidly announced on the 26th and admitted on the 30th, the Yew Tree group, Stroll’s rescue consortium took up £38m worth.

Accepting that COVID was an unexpected event the company has raised a staggering £686 million since the end of March and the trading update at the end of June had net debt of £774m, excluding lease liabilities and they are talking about extra loans.

These were the sort of numbers we saw before the £536m share issue which was supposed to solve the debt problem.

Unless DBX sales rocket where can the company go?

Putting it into context at the end of Jan 2020 the plan was to issue 45.6m new shares at £4 each, at that time there were 231million shares in issue today there are 1,824 million issued trading at a around 50p.
For those who paid around £18 at issue this has been a total disaster.
Mon 27 Apr 202058pIan Smith

Aston Martin – Resuming Production.

When Aston said that they were furloughing most of their employees I thought that it was very bad news.

With the St Athan factory being reopened on May 5th and Gaydon later it may turn on that that the short closure has actually been to Aston’s benefit.

Keeping Gaydon, where most of the traditional cars are built, closed for another month or so added to some aggressive sales deals may allow Aston to clear their inventory of models that they thought the customer would want but don’t and equally importantly no new cars were made when the market was closed or semi closed.

Although I may be overstating the case it seems to me that with the share issue funds production at Gaydon is of cars that will just about keep the company profitable, rather than providing for the future.

The DBX is made at St Athan and getting cars out to customers will show the real demand for the vehicle, rather than positive reviews and expressions of interest from potential customers.

Knowing this is critical to the future and producing the DBX whilst the government meets 80% of the payroll whilst running down stocks of the sports car range seems to be a really clear way of seeing what the company needs to make whilst saving a lot of money.
Tue 21 Apr 202058pIan Smith

AML – What Does Toto Wolff Know?

On Friday, 17th April, Toto Wolff bought just under 5% of Aston Martin, possibly from Yew Tree, so what does Toto know that I don’t?

Toto runs the F1 team part owned by Mercedes which also has a strong relationship with the Racing Point F1 team that is to be Aston Martin branded next year.

Mercedes have been openly supportive of the Aston share holding describing it as an investment.

So what is going on? I am sure that Aston is a huge risk yet Lawrence Stroll and Toto Wolff have chosen now to buy in even after COVID 19.

Okay the rights issue shares were at 30p and according to an RNS/TR1 Yew Tree are now down to a 13% holding but it is unclear at what price those shares were sold at.

Unless Toto Wolff is going to take a big stake in Racing Point any benefit to RP from Aston Martin involvement and unless Aston has a massive sales increase possibly detrimental to Aston in the short and medium term.

Mercedes already supply parts to Aston Martin, so is Mercedes considering upping its stake and making it a Mercedes brand?

Or arr they both in it for the long term, surely it will take a 5 plus years for the Aston Martin brand to gain from F1 involvement and will the company last that long if the DBX does sell well.

I also wonder if F1 as a promotional tool for Aston Martin is valid, F1 audiences tend to be older and generally people get converted to brands when they are younger.

How many of us wanted a Ferrari when we were 12, now at 50 would we be persuaded to by Aston because of F1 success? Probably not because if we could afford one we probably won't be all that interested in F1.

The problem with that is that they seem to have a quite small share holding, unless there is the expectation of another rights issue that will allow them to acquire a bigger percentage of the company.
Thu 16 Apr 202055pIan Smith

Aston Martin – Buy Only If You Believe Stroll et. al. Will Support It?

I can’t see any safe financial case for investing in Aston Martin and at today’s price of around 55p it is pretty clear that the market is not seeing the recent fund raise as anything much more than a sticking plaster.

The 2019 full year numbers were expected to be bad and they are, particularly the almost 20% drop in sales but once the market had gotten used to the idea that the Yew Tree Consortium was part of a large fund raise ending up with £536m some recovery in the price might have been expected.

Indeed there was a blip bringing the price up to 104p, but that seems to have been speculation on what the price would settle at after the share issue.

Although not ecstatic I did see the share issue as “Well it is a dilution, but it clears a big chunk of the debt and if a bit more is needed then at least the company looks viable”.

Then COVID 19 hit Europe and the USA, as well as China and suddenly sales are expected to drop again and reduced cash flow makes it seems very possible that debt could easily be back to £500m plus in a very short period of time, this is against a market cap of only £167m at 55p per share.

This is not a theoretical worry, even the company talks about having access to £150m, along with shutting down production and laying off staff.

As I understood it, the DBX was going to make or break the company and there are 2,000 orders for it, although it is not clear if these are guaranteed purchases or serious expressions of interest.

So getting the DBX assembly line proven and cars made seems critical, so maybe that is still going on but if it is the company is not being clear about it.

So should we take the Yew Tree involvement as a sign that funds, possibly via another rights issue are fairly secure if needed or will Yew Tree just walk away and write off its investment if the DBX doesn’t prove to be the Golden Goose?

I recently said that the Aston Martin sponsorship of the F1 Racing Point team was in part going to be a return for Lawrence Stroll regardless of the success of Aston, but if debt does start to rise dramatically then there may be an issue of is this the right thing for Aston to be doing?

What would be the consequences of cancelling the Racing Point sponsorship?

It seems worth noting that Aston Martin are a FTSE 250 share but the share price is not following the trend of shares in that index.

For me, unless the DBX is as successful as hoped and I am cautious about that, then Aston even at today’s price is quite possibly a value trap.
Fri 31 Jan 2020504pIan Smith

Aston Martin – Tough For Those Who Bought In At The Float

Today Aston Martin announced an investment led by Lawrence Stroll of 45.6m new shares at 400p each to raise £182m, 400p being a tiny discount to the open market price at the time.

Post this investment the number of shares in circulation goes up to 273m from 228m an increase of 19%

After publication of the accounts a further £318m will be raised by an underwritten rights issue but the price is not yet clear. The Stroll consortium will be taking its entitlement worth about £52m.

If the issue price is again 400p this would represent a further 33% of the number of pre Stroll shares.

This seems to suggest a £500m capital raise at the expense of an increase in the number of shares by 52% or a 1:2 rights issue.

There are also commitments to the Racing Point F1 team, this seems like a win for the F1 team but a terrible idea for Aston Martin, diverting scarce resources.

When Aston floated many people expected there to be some fundraising as well, but this did not happen. This fundraising has now been forced on existing share holders with a quite high level of dilution for a relatively small amount of capital in comparison with the 1,700p issue price.

So is £500m enough as it will still leave around £400m or debt to EBIDTA of around 3-3.5?

If the DBX really succeeds then probably, at least for the short term, DBX profits could be used to wipe out this debt.

However you would really like a successful model to provide funds for future development not fix issues from the past.

If the DBX only sells adequately or poorly then the debt levels seem to be too high.
Mon 13 Jan 2020462pIan Smith

Aston Martin – I Keep Wanting To Buy

There is something about the Aston Martin share price that keeps drawing my attention, the price is down to 400p ish so surely it is time to buy?

After all there have been two 15% spikes when there was news that someone was about to invest heavily, a consortium involving Lawrence Stroll and then CATL the Chinese batter maker.

Then I hear that the marketing chief has gone and that Aston the latest trading update says

Year-end cash balance was £107m, giving expected net debt range of £875m-£885m and DBX order book has built rapidly to c.1,800 since it opened on 20 November 2019, ….. As a result, we have now exceeded the various conditions to be able to draw the additional $100m of April 2022 notes and currently anticipate drawing these down within the next four weeks

Put another way, “hurray we are incurring another $100m in debt”.

At the current price of 472p the market cap is just over £1billion or the amount of debt give or take a bit.

The DBX sales numbers do look promising at around 1,800 but it is not clear if these are confirmed sales or possibly and " is a small deposit."

In 2018 and 2017 Aston were reporting an operating margin of 13.4% & 14.2% but they seem to be saying that 2019 will see something like 13%.

The DBX has a starting price of around £160k and in the past Aston have been reporting 40% gross margins.

So the DBX Sales could mean an extra £115m in gross profit in 2020 which is roughly an extra 30% on my expected figure of £400m for 2019.

But it also seems to me that debt in 2020 will incur something like £80m-£100m in interest payments.

The net debt from 2105 to 2018 was £483m, £600m, £673m and £560m, with 2019 net debt expected to be £875 the increase in revenue from the DBX is merely helpful.

Surely anyone looking to invest is going to want to see debt down to £100m-£200m, meaning they need to inject about £600m-£700m.

This would seem to me to be something like a 4:1 share issue.
Mon 19 Aug 2019446pIan Smith

Aston Martin – Mercedes Small Shareholding Temps Me.

Aston Martin going broke is hardly unusual, so is this iteration of the company any different?

I think that this time it is, the main reason is the DBX, the SUV due in early 2020.

It seems to be priced above the Porsche Cayenne and about half the price of a Rolls-Royce Cullinan so it is occupying a sector where there is hopefully demand, after all the Cayenne is a relatively common car.

It’s all very well being pure, Aston Martin only makes gentleman’s GT cars, but many credit the Boxster and Cayenne for saving Porsche, the 924, 944 and 928 were all fine cars but none had the history of the 911 or created any for themselves.

The Range Rover Evoque took the Range Rover brand into a new market as well, an off road vehicle that whilst good off road, did what the customers mostly wanted, to be good on road.

It may be that the DBX is a runaway success or the wrong car, at the moment I have no way of knowing, but that they are just about ready to launch the vehicle is a sign that the management are serious about the business not just boys playing with toys at the share holder’s expense.

The Strategic European Investment Group’s offer in July to buy another 3% of the company came just before the downbeat annual interim report, but they are going through with the purchase. Also and critically for me is that Mercedes owns about 4%.

Now 4% of Aston might be the milk and biscuits bill for Mercedes, but it gives Mercedes an interest in the company and Aston some access to Mercedes tech. Aston have some sort of a partnership with Red Bull F1 which may give access to Honda Power Unit tech and have collaborated with Williams Advanced Engineering (Williams F1) in the Rapide E.

In one way I regard the Rapide E as an intermediate design, the batteries were put in the space made free by the removal of the engine, but I think that was the point. Make a limited edition of 155 and get feedback from customers on what they really want. The Rapide E and Jaguar I-PACE both excluded a “Ludicrous Mode” as tech that is fun a couple of times then never used again.

A traditional petrol GT car, an electric GT car and SUVs in both petrol and electric make the range much more attractive to a dealer than just petrol GT cars and dealer’s reluctance to have Aston’s in stock has been suggested in a number of places.

How much information on Aston’s electric vehicle experience will make its way back to Mercedes is unknown.

There is a reason why I have go this far looking at the vehicles without discussing the financials, this is the financials look horrible to me.

There was an operating loss of £38 m for first half, but £19m of this was an accounting reversal for “Other Revenue” which was taken in the 2018 accounts for the sale of IP but the money is now not expected to be received.

The reported operating loss is

Reported Adjusted By Me
2019 2018 2019 2018
-£38m £64m -£21m £45m

Another $190m of debt was taken on in April to support investment flexibility giving the worrying high £859m gross debt.

Aston Martin is not a start-up company so increasing debt is worrying me and I can’t see how this level of debt can be supported by the current sales levels, it appears that it is going to be close to a third of gross profit.

If the DBX can tap a new market sector and the trend where revenue has doubled between 2015 and 2018, up to £1,097m then maybe.

Even if this does happen, with a current share price of around 466p and a market cap of just over a billion something like a 1:1 share issue is looking quite possible.

A debt free Aston is exciting to me but a heavily indebted luxury car maker, even with shares now down to about 25% of their launch less than a year ago?
Thu 25 Jul 2019766pIan Smith

Aston Martin – Where Is Its Settled Price?

Aston Martin only went public about 9 months ago, Nov 2018 and their shares have dropped from 1,700p to 766p in what was pretty much a straight line.

I was starting to believe that the market was happy at around 1,000p but a weak trading update yesterday has pushed the price well below that level.

Normally I would have thought leave well alone and the bottom is unknown, but the private equity firm Investindustrial which owns 31% has offered to by 3% of the company at 1,000p at the start of July.

So was this offer made without knowing the predictions made in the trading update and do those predictions change the argument.

At 766p the share price is almost 25% below that 1,000p price, so either the market is over reacting or have sales by Primewagon, who held 36% of Aston Martin at one stage have taken the price too low?
Mon 04 Mar 20191077pIan Smith

Aston Martin – Not A Great Start As A Plc But Do The Numbers Hide Success?

Aston Martin had a history of owners who struggled to make the company a success and there seem to be concerns that in its current for as a plc it may continue to struggle.

Dropping from an IPO price of 1,700p to 1,100p in a fairly even line before starting to recover, the 2018 results brought it down to nearly 1,000p

During 2018 they sold 6,441 vehicles with £1.1billion of sales but debt of about £560 million and the latest report is full of things that worry me. The biggest is that so many numbers are reported as “adjusted” I worry that this creates a false picture; In this case they turn a £68million profit into a £57million loss.

After considering that the IPO incurred £136 million of expenses and these were genuinely one-offs as they mostly relate the removal of preference shares and employee incentives then there may be hope.

These one-offs hit year financing expenses really hard at £141million, but £61million of this was preference share interest due to be paid being paid in one chunk leaving a real value of £80million.

I am stll struggling to get past the many adjustments that have been made but am tending to the conclusion that the headline numbers are close to meaningless and it was actually a good year!